Aflac Incorporated Q3 FY2025 earnings call

• Japan Operations: Aflac Japan had an 11.8% year-over-year sales increase, with a 42% increase in cancer insurance sales driven by Miraito. Tsumitasu product repricing in September has potential to boost sales. Strong premium persistency is vital. Broad distribution channels support growth.
• U.S. Operations: Generated $390 million in new sales during the third quarter, a 2.8% year-over-year increase. Maintained strong premium persistency of 79% and increased net earned premiums 2.5%. Focus on profitable growth via underwriting discipline and expense management.
• Capital Deployment: Deployed a record $1 billion in capital to repurchase 9.3 million shares of stock and paid dividends of $309 million in the third quarter of 2025.
• Milestones: 2025 marked 30th anniversary of Aflac Cancer and Blood Disorders Center and 25th anniversary of the Aflac Duck.

Japan Segment: Net earned premiums for the quarter declined 4%. Aflac Japan's underlying earned premiums (excluding deferred profit liability, paid-up policies, and reinsurance) declined 1.2%. Japan's total benefit ratio was 39.3% for the quarter, down nearly 10 percentage points year-over-year. Persistency remained solid at 93.3%. Expense ratio in Japan was 19.8% for the quarter, down 20 basis points year-over-year. Adjusted net investment income in yen terms was relatively flat at JPY 98 billion. Pretax margin for Japan in the quarter was 52.2%, up 750 basis points year-over-year. U.S. Segment: Net earned premium was up 2.5%. Persistency increased 10 basis points year-over-year to 79%. Total benefit ratio came in at 45.6%, 200 basis points lower than Q3 2024. Expense ratio in the U.S. was 38.9%, up 90 basis points year-over-year. Adjusted net investment income in the U.S. was up 1.9% for the quarter. Profitability in the U.S. segment was very strong with a pretax margin of 21.7%, a 90 basis points increase compared with a strong quarter a year ago.

• For Japan, expect the benefit ratio to be in the 58% to 60% range, expense ratio at the lower end of the 20% to 23% range, and pretax profit margin in the 35% to 38% range.
• For U.S., expect the benefit ratio to be at the lower end of the 48% to 52% range, expense ratio in the mid- to upper end of the 36% to 39% range, and pretax profit margin at the upper end of the 17% to 20% range. Continued flexibility in managing balance sheet and deploying capital to drive strong risk-adjusted ROE.

• Impact of yen-dollar exchange rate on leverage, as leverage ratio is affected by moves in the yen-dollar exchange rate, which is part of the enterprise hedging program.
• Credit cycle risks, as capital ratios are monitored to withstand credit cycles and external shocks.
• Private credit market risks, including credit management and liquidity risks, but Aflac is comfortable with its current strategy and disciplined underwriting.

Q: Joel Hurwitz asked about U.S. product offerings and Japan sales.

A: Virgil Miller commented on U.S. product pressures and growth in certain areas, while Daniel Amos and Koichiro Yoshizumi discussed strong cancer sales in Japan and the performance of Tsumitasu product.

Q: Thomas Gallagher inquired about Japan product repricing and launch of new medical insurance.

A: Max Broden explained repricing related to Tsumitasu, and Masatoshi Koide discussed the new organization to support concurrent launch of products.

Q: John Barnidge asked about U.S. buy-to-build initiatives and inorganic growth.

A: Virgil Miller and Max Broden discussed progress in buy-to-build initiatives not yet at scale and focus on organic growth in U.S. segment before considering inorganic opportunities.

Q: Ryan Krueger followed up on inorganic growth and Japan benefit ratio.

A: Virgil Miller and Max Broden discussed focus on organic growth and Japan benefit ratio range remaining reasonable.

Q: Wilma Jackson Burdis asked about Japan cash earnings and share repurchases.

A: Max Broden explained drivers of high Japan cash earnings and that share repurchases depend on capital ratios and returns.

Q: Suneet Kamath asked about U.S. broker distribution and sales growth.

A: Virgil Miller and Dan Amos discussed U.S. sales pipeline, focus on growing producers, and progress in bundling products.